Debt

Training August 2008

Aims and Objectives
By the end of the session you will:

• Have reviewed your understanding of Debt law.

• Understand how to diagnose Debt calls.
• Be able to identify the correct referral option for
the client.
What is debt advice?

• Debt advice is the way in which we try to

assist those who are experiencing
difficulty in fulfilling their financial
commitments
• Debtor – the person that owes the debt
• Creditor – the person the debt is owed to
Statistical examples
• 1 in 5 borrow to pay household bills
• Average UK household debt £7,000
• Average UK Mortgage debt £45,000
• Average UK student loan £10,000
• Less than 50% save money regularly
• Less than 20% make pension provision
• Over 1,000,000 people pay their monthly
mortgage payment with a credit card.
Who falls into debt & why?
• Long-term low income/benefit claimants

• Sudden and dramatic loss of income

• Ease by which credit is available

Liability
• “Liable for” a debt means you are
responsible for paying that debt
• Normally only responsible for own debts
• Can be responsible for debts of others
- If you act as a “guarantor”
Enforceable Contract
• If a valid contract exists, is it
enforceable?
• Agreement signatures
• Regulated agreement
– Consumer Credit Act
– Catalogue debts
• Limitations Act 1980
• Minors
• Faulty Goods
Enforceable Contracts
• Undue Influence
• Duress
• Misrepresentation
• Extortionate Credit
Debt Reduction

• Maximising Income
– Benefit entitlements
– Contributions from non-dependent
relatives
Types of Debt
• Priority debts – non payment could result
in:
– Being disconnected from an essential
service
– Losing your home
– Losing essential goods or other services
– Being imprisoned

• Non-priority debts – will not result in any

of the above
Priority Debt
• Rent or Mortgage Arrears
• Second mortgages and secured loans
• Tax and V.A.T.
• Council Tax
• Domestic fuel bills, (not water rates)
• Magistrates Court Fines
Priority Debts (cont)
• Parking Penalties
• Maintenance Payments
• Benefit Overpayments
Priority Debts – Common Scenarios
“ I have not paid my mortgage for two
months and I am worried about how I am
going to clear the arrears”

“I am behind with my council tax and now

the council are demanding I pay the full
amount. What can I do?”
Non-Priority Debt
• Credit cards
• Personal loans
• Bank overdraft
• Water rates
• Catalogues
• Store cards
• Hire Purchase
Non-Priority Debts Common
Scenarios
“I have credit card debts of over £10,000
and I have fallen behind with the
repayments. I am getting constant
phone calls and letters from debt
collection agencies, and I don’t know
what to do”
Financial Statement
• Concise summary of financial situation
• Will be used as the basis of negotiation with
creditors
• If it shows that the debtor has no disposable
income the creditor will often accept this and
stop pursuing the debt
• Creditors will often accept nominal payments
towards the debt if the statement shows that
this is all the debtor can afford
Financial Statement (cont)
• The financial statement should contain
the following information:
– All income (weekly or monthly)
– All essential expenditure
– All priority debts
– Disposable income
– Non-priority debts
Debtor Options for NP Debts
• Pro-rata payments
• Partial write-off
• Full write off
• Nominal payments
• “Time order”
Multiple Debts
• If the debtor has many different debts
there are a number of potential options
to resolve this
– Administration Order
– Individual Voluntary Arrangement (IVA)
– Bankruptcy
What can the creditor do?
• “Money only” claim in the county court*
County court Judgment (CCJ)
– Recorded on debtors credit file
– Affects credit rating
– Makes it difficult to get credit in the
future
– Have to pay creditors costs
Enforcement of CCJ
• If you don’t pay what has been ordered
in a judgment there are several things a
creditor can do:
– Warrant of execution (court bailiffs)
– Attachment of earnings
– Charging order
Harassment
• Office of Fair Trading (OFT) guidelines –
July 2003

• It is illegal to harass or bully clients in

the pursuit of an outstanding debt

• Breach of guidelines – complaint to local

Trading Standards office
Bailiffs
• County Court Bailiff

• Court Enforcement Officer

• Private Bailiff
Powers of Bailiffs
• Seizure of goods
– If the court issue a warrant of execution,
bailiffs can attend at your home and take
your goods. These can be sold to pay off
the debt.

• Warrant valid for 12 months after date of

issue
Bailiff Access
• Debtor does not have to allow Bailiff in
• Bailiff must access premises by peaceful means
– Being invited in
– Climbing through an open window
– Opening a door that is not locked
• Once peaceful entry gained, can enter by force
on subsequent occasions
• If no previous peaceful entry, can only use force
when enforcing unpaid Magistrates Court
Fine(s)
What can Bailiff’s Take?
• Bailiffs can only levy on ‘goods’
• Can take everything except those items
that are needed personally in
employment, business, or vocation
• Cannot levy from anyone other than
debtor
• Can levy jointly owned goods
Debt – Key Questions
1. What type of debt – relating to a business or personal
debt?
2. Extent of debt – is it just the one that they are telling
you about or are there more?
3. Are there any priority debts within the debts they have
– i.e. could they lose their home if they do not keep up
repayments?
4. Have they taken any action to deal with their debts (or
specific situation) before calling us?
5. Has client sought any advice? If so, what advice given?
6. Does the client want to contest the debt?
Dealing with Debt Calls
• Key bits of info needed to be able to decide
where you should refer a call
• Outcome will be different depending on type
and value of debt, ability to repay, previous
action taken
• To give the client the best service you must
find out all this information before deciding
where to refer them
• Work with lots of debt organisations so there
should be somewhere to refer every caller to
Key Points on Call Flows

• The call flows will not cover every Debt

query
• They are not a mathematical formula
• They are an aid to correct referral
• They must be used together with key
questions and your own judgement
• We can add further call flows if we get
significant numbers of calls in areas not
already covered
Advice and referral options

• Telephone specialist
• Debt helplines
• Face to face advice
• Self help resources
• Ineligible clients
• Out of remit referrals
Specialist Telephone Advisers
Specialist telephone advisers deal with;
– Eligible clients
– Priority debts,
– Debts where court action/bailiffs involved
– Challenging debts
– Clients with no ability to pay debts back
– Urgent cases
– Client wanting advice on bankruptcy
– Business debts secured on personal property / Business
Debts from a Business that is no longer trading.
– Small Claims*

Direct transfer into queues

Small Claims Debt Cases in Scope for
Telephone Advice
Telephone Advice:

• Clients being pursued for a debt in the small

claims,
• Client is a creditor seeking to enforce order
through the small claims court.

Excludes:

• Creditors seeking to enforce a business debt.

• Very Basic Administrative queries.
Consumer Credit Counselling Service
(CCCS)
• Charitable organisation funded by credit
industry
• Specialise in debt management plans but also
advise on IVA’s and bankruptcy
– Must have at least two non-priority debts
– Can help clients with priority debts*
– Clients with some income to make
repayments, could be benefits (But not means-
tested benefits)
– Cannot help clients who are contesting a debt
• Warm transfer to dedicated team
Business Debts:

Business Debts Can go to Telephone

Specialist when:
• The client was in business (except ltd
companies) but is no longer trading.
• The business debts are secured against
their property.
National Debtline
• Government funded helpline
• National Debtline deals with;
– Non-eligible clients wanting to challenge debts
– Non-eligible clients unable to pay back debts
– Clients wanting to challenge or re-arrange debts
by themselves (self help pack on website)
• Often very busy so need to manage
expectations
• Offer cold transfer at local rate as well as
Freephone number
Business Debtline
• Part of National Debtline
• Deals with;
– Debts resulting from business deals
– Debts resulting from bankruptcy of a
business
• Small helpline, often very busy so need
to manage expectations
• Offer cold transfer at local rate as well as
Freephone number
Face-to-face Advice

Some callers may specifically request face-

to-face advice

• Very few solicitors do debt work, mainly

CAB’s so may struggle to find a supplier
• Think about urgency!
Ineligible clients
• CCCS and National Debtline have no
financial eligibility criteria so could help
• Free advice is available from NfP such as
CAB or Law Centre
• Client could pay privately for face-to-face
advice from Solicitor
• CLA Leaflet – “Dealing with Debt”
Self Help Resources

• These could be given to client if they are

ineligible for specialist advice.
• You should also consider giving these as
another option if referring to face to
face.
• Clients will need web access for the self
help resources
Out of Scope Clients

Business Debts:
The Client should be referred to Business
Debtline; except where client meets criteria
outlined earlier.
CSA Debts – dispute that child is client’s
responsibility
The client should be referred to family solicitor
Linked Problems & Problem Clusters
Client’s marriage has broken down and he is
suffering from depression. He has lost his job
due to persistent absence and has no money to
pay his mortgage or his bills.

Client has not received housing benefit and

cannot pay rent. The landlord is now
threatening to evict the client unless he makes
a payment.
Debt Music Quiz
“Pay your rates, pay your water rates, pay your
rates, pay you taxes”

“You’re Lovin’ gives me such a thrill, but you’re

lovin’ won’t pay my bills. Now give me money,
that’s what I want”

“I’m just a poor boy from a poor family”

“And he who laughs last owes you sweet nothing, nothing at

all”
Debt Music Quiz
“Money, get away, get a good job with more pay
and you’re OK. Money, it’s a gas, grab that cash
with both hands and make a stash.”

“I work all night, I work all day to pay the bills I

have to pay, ain’t it sad, and still there never
seems to be a single penny left for me, that’s too
bad.”

“Young married couple in debt, ever felt had?”

Debt Music Quiz
“I been laid off from work, my rent is due, my kids
all need brand new shoes.”

“I said pretend you’ve got no money, she just

laughed and said ‘oh you’re so funny’”

“But what can a poor boy do, except sing for a

rock n’ roll band”